Smith v. Miller

• Decision Date: 30 November 1981
• Docket Number: No. 80-2029,80-2029
• Citation: 665 F.2d 172
• Parties: Ollie SMITH, et al., Plaintiffs-Appellees, v. Jeffrey C. MILLER, Director, Illinois Department of Public Aid, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 172

665 F.2d 172

Ollie SMITH, et al., Plaintiffs-Appellees, v. Jeffrey C. MILLER, Director, Illinois Department of Public Aid, Defendant-Appellant.

No. 80-2029.

United States Court of Appeals Seventh Circuit.

Argued March 31, 1981.

Decided Nov. 30, 1981.

Patrice Suberlak, Ill. Sp. Asst. Atty., Chicago, Ill., for defendant-appellant.

James D. Weill, Chicago, Ill., for plaintiffs-appellees.

Before FAIRCHILD, Senior Circuit Judge, and SPRECHER and WOOD, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

The Defendant in this class action, Jeffrey C. Miller, as Director of the Illinois Department of Public Aid ("Department"), appeals from the district court's order enjoining the Department from exceeding stipulated time limits in processing applications under Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq. (1976), for specialized medical and dental care. The district court, concluding that the Department's failure to promptly process applications for specific medical and dental services listed in the Department's regulations violated Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq. (1976), and the Department of Health, Education and Welfare's ("HEW") ¹ regulations interpreting that Act, enjoined the Department from failing to process applications for special medical services within stipulated time limits and also ordered that those applications for specialized care not granted or denied within the time limits be automatically approved. The Department appeals only from that portion of the order deeming applications for care untimely processed automatically approved. We affirm.

I.

Participating states within the Medicaid system receive large federal contributions to reimburse providers of medical and dental care to indigent families with children and to blind, disabled, or elderly individuals, 42 U.S.C. § 1396 (1976). While the states retain much discretion in the administration of the program, it is well established that in return for these substantial federal contributions, they must adhere to the dictates of Congress in the operation of the program under Title XIX and to HEW's requirements and regulations interpreting the Act. King v. Smith, 392 U.S. 309, 317, 88 S.Ct. 2128, 2133, 20 L.Ed.2d 1118 (1968).

As part of its administrative scheme, the Department requires its prior approval for a wide variety of medical and dental treatments before compensating medical care providers for their services. Without this consent, the Department refuses to reimburse the providers, regardless of whether the need eventually can be substantiated. Consequently, for a long list of medical care treatments-orthopedic shoes, artificial limbs, oxygen, and prescription drugs, to name a few-the Department's approval precedes the provision of important health care services to Medicaid recipients.

The plaintiffs in this action represent the class of all individuals whose past or pending requests for medical or dental services require the Department's review and approval before care is given under Title XIX.

While the plaintiffs did not contest the Department's prerogative to maintain a prior approval system or the validity of the regulation itself, they challenged the Department's administration of its system. Specifically, they alleged that the Department has not processed requests for special medical care promptly enough to satisfy the requirements of Title XIX and the HEW regulations interpreting the Act. ² The plaintiffs sought, inter alia, in their complaint injunctive relief establishing fixed time limits to ensure the Department's prompt processing of requests for specialized medical care. The district court granted the plaintiffs' motion for summary judgment on the issue, finding the Department's failure to set specific time standards violated both 42 U.S.C. § 1396a(a)(8) (1976) and HEW regulation 42 C.F.R. § 435.930(a). In negotiation over the length of the time limits, the parties then arrived at a compromise draft of the permanent injunction. The district court's final order adopted the parties' stipulated time limits and imposed those limits upon the Department for governing its disposition of prior approval requests. Those limits ranged from ten to thirty days, depending upon the type of medical care requested. The district court also ordered that all requests neither granted nor denied within the time limits be automatically approved. Fashioning this portion of the order, the district court adopted a suggestion from HEW's Medical Assistance Manual. That manual provides in pertinent part:

In order to assure timely disposition of requests for prior authorization, the system should provide that requests which have not been acted on within a specified time are automatically approved.

HEW, Medical Assistance Manual, § 5-30-20C.

The Department now appeals from the district court's decision deeming all requests for medical care untimely processed under the Department's prior approval procedures automatically approved.

II.

It is uncontested that the district court possessed the equitable power to enjoin the Department's violation of federal laws and regulations. While a state's participation in the Medicaid program is purely voluntary and its acceptance of substantial federal funds uncoerced, once electing to participate, it must fully comply with federal statutes and regulations in its administration of the program. Townsend v. Swank, 404 U.S. 282, 92 S.Ct. 502, 30 L.Ed.2d 448 (1971); King v. Smith, 392 U.S. at 317, 88 S.Ct. at 2133; Areizaga v. Quern, 590 F.2d 226, 227 (7th Cir. 1978); Stanton v. Bond, 504 F.2d 1246, 1247 (7th Cir. 1974), cert. denied, 420 U.S. 984, 95 S.Ct. 1415, 43 L.Ed.2d 666 (1975). Injunctive relief may, of course, be applied to state officials whose actions derogate federal Medicaid laws and regulations; Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1905). Congress intended that the "full panoply" of judicial remedies be available to courts considering in 42 U.S.C. § 1983 actions a state's compliance with the Social Security Act. Edelman v. Jordan, 415 U.S. 651, 691, 94 S.Ct. 1347, 1369, 39 L.Ed.2d 662 (Marshall, J., dissenting). As the Department points to no explicit provision within the Act and no ground in the Constitution which restricts the district court's authority to award equitable relief, the district court had authority to exercise its full powers of equity to effectuate the purposes of the Act. Edelman v. Jordan, 415 U.S. at 673 n.15, 94 S.Ct. at 1360 n.15; Mitchell v. DeMario Jewelry, 361 U.S. 288, 292, 80 S.Ct. 332, 335, 4 L.Ed.2d 323 (1960).

Without contesting the district court's authority to fashion an equitable remedy, the Department first argues that the district court, exercising its equitable powers, may not anticipate a party's failure to observe its order and thus prematurely provide for that lapse in the order for permanent relief. We disagree.

Many courts have exercised equitable powers to force a state to make or continue making public relief payments until the state's administration of its public aid program comports with federal statutory or constitutional standards. In Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), the United States Supreme Court affirmed the district court's order foreclosing the administrator of New York's AFDC program from terminating welfare benefits before beneficiaries were given notice and an opportunity for a fair hearing. In Eder v. Beal, 609 F.2d 695 (3rd Cir. 1979), the Third Circuit affirmed a district court's order enjoining the state of Pennsylvania from terminating its eyeglass program, a discretionary program under the Medicaid laws, until it complied with the notice requirements specified in HEW's regulations. See, e. g., Graham v. Richardson, 403 U.S. 365, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1971); Rosado v. Wyman, 397 U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442 (1970). Thus, the district court may anticipate in its permanent order for relief the state's possible failure to comply with its order. It may order the state to make Medicaid payments against its will until the administration of its Medicaid program fits the federal statutory requirements or until the state elects to forfeit the matching federal funds to which it is entitled. We believe that, by ordering all applications not decided within the stipulated time limits be automatically approved, the district court did no more.

III.

While it is certain that the district court need not presume that the state will adhere to both the letter and spirit of its order, it remains to be seen whether the district court's failure to adopt such a presumption under the immediate circumstances amounts to an abuse of discretion in light of our decision in Wright v. Califano, 587 F.2d 345 (7th Cir. 1978). ³ In Wright, we held that the district court abused its discretion by ordering that all applications for participation in the federal Social Security program not timely processed by HEW be automatically approved. The district court in Wright imposed time deadlines upon HEW to ensure its prompt processing of applications for old age and survivor's benefits from claimant's who had never before participated in the program. It further ordered that recipients whose requests were not timely processed were presumed eligible and entitled to payments until the agency expressly found that they no longer qualified for benefits. A careful examination of the circumstances underlying this appeal shows that the situation presented in Wright is not again before us.

The Department's concerns in protecting the public fisc differ starkly from HEW's concerns which we found decisive in Wright. There, the processed application was the initial determination of a recipient's eligibility for old age and survivor's benefits under the Social Security Act. The Department's prior approval requirement, in contrast, operates only after...